Choosing Your Business Investments Wisely

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Man at laptop choosing wise business investments

Just like we must determine which relationships are worth putting in the time and effort, we must think carefully about which businesses are worthy of our investment. It is easy to get caught up in the excitement of entrepreneurship. And I don’t blame the folks who want to jump right in — I can tell you from experience that being your own boss is great. However, it does come with its own set of challenges, which is why choosing the right business from the beginning is crucial to achieving long term success (and fulfillment).

Let’s Talk Sustainability: The Business Kind

Environmental sustainability seems to be getting a lot of attention nowadays, but let’s not forget about the importance of business sustainability. Aside from its large-scale benefits economically, identifying a business that will still be thriving decades from is every entrepreneur’s best friend.

It’s easy to fall into the trap of those attention-grabbing Top 25 Franchise Lists or The 10 Hottest Businesses To Own In 2023. Those titles do have a nice ring to them, but will they still be winning popularity contests in a few years? Or will they simply be a trend that has run its course?

I always tell my clients to do their best to overcome that FOMO mentality and instead to let their logic lead the way. Before committing to a business, you’ll want to ask yourself the following questions:

  • Will it provide the type of lifestyle I want to live?
  • Am I comfortable with the required financial investment?
  • Is it a proven concept with a trusted reputation?
  • Will I receive the support I need to succeed?
  • Am I going to be happy doing the required daily tasks?

There is no entrepreneurial endeavor that is completely without risks. But if you can answer “yes” to all of these questions, you can confidently move forward with your business investment knowing it’s the right fit for you and that the benefits outweigh the costs.

Don’t Be Fooled By Shiny Exteriors

Branding is a powerful tool for any business. It creates brand awareness while providing an opportunity to create loyalty and trust among consumers. That being said, don’t judge a book (or in this case, a business) by its cover. Being a potential customer looking to make a one-time purchase is an entirely different circumstance than being a potential business investor or franchisee. As much as you may love a company’s tagline or laugh out loud at their commercials, due diligence is of the utmost importance!

The holy grail of franchises is the FDD (Franchise Disclosure Document). As lengthy and overwhelming as it may be, you’ll want to read through it carefully. However many cups of coffee it takes — make it happen!

In terms of finances, you’ll want to focus on Item 7 and Item 19, which discuss the Initial Investment and the Earnings Claim of the franchise you are considering. If you believe you can write a business plan that marries those two components, you’re in a good spot.

Last, but definitely not least, you’ll want to take a gander at the appendixes to find a list of current franchisees and their contact information. The best insight you could possibly receive will come from these individuals. After all, they are living your potential future.

You’ll want to hear the compliments and complaints they have about how the franchise is operated. Having a clear idea of what you’re getting into before you officially invest is a huge advantage. Whether it solidifies that you are making the right decision or helps you to avoid a trainwreck, you’ll be better off for it in the end.

Time To Take The Leap!

There’s a reason they refer to business ownership as taking the entrepreneurial leap as opposed to the entrepreneurial walk. You have to go into it fully committed and energized. If you are at a point in your life where you are wholeheartedly passionate about becoming an entrepreneur, CatchFire Funding can help you make your realization a reality.

My highly qualified team and I will make that leap feel a lot less scary. We walk you through every step of the process and make sure you ask (and answer) all the right questions to ensure you don’t just invest for the sake of investing. At CatchFire Funding, we help our clients to invest wisely.

Contact us today to talk business and anything else that’s on your mind.

5 Things Entrepreneurs Do Before 9AM

Talk to most successful entrepreneurs, and you’ll hear a common complaint, “There just aren’t enough hours in the day.” If we could, many of us would probably forgo sleep. But since that’s not going to happen, we’re artful in finding ways to squeeze every minute out of the day, starting with the moment we roll out of bed.

Most of us are at our best first thing in the morning, so how do we use those precious hours to our advantage? For starters, we use the morning to focus on top-priority activities, before we’re bombarded with distractions.

We have the most willpower in the morning. Then, things like diets or the vow to exercise come undone as the evening approaches. It’s common to lose self-control as the day comes to a close.

On the other hand, the early morning offers a fresh supply of energy and willpower, and there are fewer distractions. It’s one of the best times to focus and tackle choice tasks.

So, what do successful entrepreneurs do before 9 am when they are rested and their minds are fresh?

  1. They check their email.

Many successful business owners start their day off checking their email, me included. I disregard all the miscellaneous stuff that’s just noise. All of the ads and companies trying to sell me copy paper. I delete those and tackle the important emails.

When I’m home in the morning, I admit, I use that time to clear my inbox. Getting this out of the way helps me prioritize and move on to the important emails that need to be addressed once I arrive at the office.

  1. They read the news.

Whether it’s watching the news while on a treadmill, pouring over the morning paper with a cup of coffee, or reading news and Twitter feeds from their smartphones, most entrepreneurs have a morning ritual for absorbing the headlines. It’s great for keeping one’s finger on the pulse.

  1. They strategize.

Planning the day ahead is an important habit to master; it helps keep you focused on the bigger picture when you’re inundated with distractions. Using the morning to do your big-picture thinking, even if it’s while you’re in the shower (I’m guilty of this one), helps you create a roadmap for the day.

  1. They (realistically) address their long to-do list.

The early morning hours are an ideal time to break out that to-do list – and prioritize it. Determine the top priorities that need focus, then take 80 percent of the list that you won’t get to that day, and don’t stress about it.

  1. They exercise.

One of the top morning activities of the rich and powerful is exercise, whether it’s taking a hike, working out at home, or hitting the gym. Entrepreneurs are incredibly busy people, that’s why many of them work out at the crack of dawn before exercise falls off their to-do list.

Beyond the fact that exercise means you won’t run out of time or energy later in the day, a morning workout reduces stress, increases energy, improves sleep, and of course, increases longevity.

What I do before 9 am…

There is certainly some planning of the day. That happens in the quiet moments and during the drive that I have. Not only do I eat breakfast (for energy) and exercise, I take time to check all of my marketing stuff.

If I can handle one, two, or three things before I get to the office, it increases my productivity, otherwise, I get distracted. Not only do I look at things like Google AdWords, Bing, and my WordStream account, I go to Flipboard and go to their entrepreneur stream and read articles that pique my interest.

My morning ritual has made me a better business owner, employer, and spouse. If you’re thinking about going into business, I suggest easing into a routine that you find makes you the best business owner you can be.

If you would like to discuss the business and funding opportunities available to you, don’t hesitate to give me a call!

What Makes an Entrepreneur Extraordinary?

This is a question without a simple answer, as I have seen extraordinary entrepreneurs come from a wide variety of backgrounds with vastly different skill-sets. However, if I had to settle on a handful of attributes that most all of these entrepreneurs have in common, the list would look something like this:

  1. Strategic

Successful entrepreneurs do their research and make informed decisions, however, there’s never a 100 percent answer. Extraordinary entrepreneurs know they can’t wait for a perfect set of data to show up and make a decision.

They’re trying to balance risk vs. reward. Many decisions come with some level of risk that they aren’t going to be successful. Often, it comes down to the 80/20 rule: 20 percent of the decisions business owners make affect 80 percent of their business.

Further, these decisions shouldn’t be monumentally business-changing decisions; entrepreneurs don’t want many of those. Everybody faces some of those big decisions in life; buying a business is one of them. Once you’ve crossed that bridge, each decision becomes less impactful.

In other words, every decision gets easier. As the business grows, the dollar value of those decisions are less impactful in the grand scheme of things.

  1. Decisive

Extraordinary entrepreneurs get over being paralyzed by the decision-making process. With experience, and as their business grows, they grow into the habit of being decisive. If someone can’t make decisions, their business won’t move forward, and they’ll lose the confidence of their employees.

Entrepreneurs are not wafflers. It’s part confidence, part motivation. If you’re motivated to make a change, you’ll make up your mind and you’ll get it done. 

  1. Integrity

They find that being honest with themselves, their employees, customers, service providers, and suppliers is of the utmost importance, it’s how they sleep at night. The best entrepreneurs find that integrity is an important aspect of running a longstanding operation – that it’s vital.

Building the trust of everybody that’s working with you is essential, and cannot be understated. It’s equally important to be transparent with your spouse and family.

  1. Resilient

People have different thresholds when it comes to resilience. Many successful entrepreneurs have been knocked down dozens of times. Sometimes they realize that they should change what they’re doing. They see their failures as lessons; they see the value in getting knocked down.

It doesn’t make sense to keep getting knocked down by the same bully or to hit your head against the same wall repeatedly. Successful entrepreneurs know not to tap out, but to try a different door. One of the doors is going to open. Now that may be the definition of resilience. Be persistent enough that one of the doors will be the right one.

Sometimes, the door that you’re most successful with is the door out of your situation. Over eight years in my computer business, I tried lots of different strategies, but I realized I needed a way out.

Not being an entrepreneur never crossed my mind, and neither did going back to a corporate job. Instead, my line of thinking was, “Let me do a complete restructure here.” It’s a fresh start – there’s an aspect of resiliency to that.

  1. Open to Advice

Everybody has a limit on their perspective. Being able to have outside eyes gives you a different perspective so you’re not blinded by everything that’s in front of you.

Having a conversation with a mentor or fellow entrepreneur and having them ask, “Have you thought about doing it this way?” is a valuable experience. When someone you respect is able to impart a different perspective where you go, “Wow, I never thought of it that way,” that’s a successful interaction.

Is there a secret recipe for becoming a successful entrepreneur?

Probably not. But if you adopt these attributes, they can certainly help you become the successful entrepreneur that you’ve envisioned yourself to be.

Trust in yourself, and don’t let your mind become paralyzed by fear. When you keep your goals in your sights and keep moving forward, one day you’ll find that the success you’ve been waiting for may be just behind the next door.

In the words of Debbi Fields, the founder of Mrs. Fields Cookies, “The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.”

If you’re looking for the right business or a way to fund your dream business, I encourage you to reach out to me for help. It’s what I’m here for!

You vs. Wall Street: Which is a Better Investment (in 2020)?

Let’s be honest: So far, 2020 feels uncertain. We find ourselves at a cross-section of diminished consumer faith, and a government that is – at best – on uncertain ground. While 2019 was considered a generally good year for the United States economy, experts believed that 2020 would see exceedingly expensive stocks – but that was before the novel coronavirus (COVID-19) changed everything.

On April 8, 2020, The New York Times published an article on how the S&P 500 was up about 23 percent from its low on March 23rd. “The market has been steadily climbing since it hit that bottom, a rebound that began after the Federal Reserve and lawmakers in Washington took steps to protect the U.S. economy from a collapse amid the coronavirus pandemic. Stocks are still down about 19 percent from their late February high,” according to The New York Times.

The article went on to mention how in Europe, recent data revealed that in France and Germany, the two largest economies, were “heading toward their sharpest downturns since World War II.”  Could this be a warning for other developed nations about how bad it’s going to get?

Wall Street is Blindsided by the Coronavirus

In the Bloomberg Businessweek article, “Wall Street Gets Blindsided by the Coronavirus Meltdown,” the article’s authors wrote about a dinner gathering of some of the most famous hedge fund managers that took place at Capital Grille near Rockefeller Center.

At the dinner, which was put on by Goldman Sachs Group Inc., the masters of capitalism didn’t have the usual “spring in their step.” Instead, they spent the evening trying to wrap their heads around what was in store as COVID-19 spread throughout the nation.

What was going through the Wall Street giants’ minds that night at dinner? “The fallout could resemble the 2008 crisis, the 2001 collapse, global chaos in 1998, or something else—the very investors who made their fortunes from them weren’t sure. They stared into phones that told them stock futures were falling so much that trading would soon be halted,” reported Bloomberg Businessweek. What followed was a brutal week for investors around the nation. And the Wall Street billionaires and bosses were dumbfounded; they were as bewildered as everyone else.

We Don’t Know Where Things Are Going

In reality, no one can say for sure where things are going and that creates uncertainty for investors. And for people who consider investing in their business or Wall Street, the pandemic gives them food for thought. Clearly, Wall Street is unpredictable and it can crash at any moment when the unexpected happens; Corona proved that. In the face of uncertainty, investing in your own business and having control allows you to have more confidence over the ultimate outcome vs. having faith in someone else’s ability to pick stocks.

I understand the fear of risk, the discomfort that comes from relying on Wall Street alone. From my perspective as a serial entrepreneur, I’ve always been a firm believer in having my own control, controlling my opportunities, and making my own decisions.

Should You Invest in Your Business or Wall Street?

In light of the above, the question comes down to, “Should I invest in myself by investing in my business instead of investing in Wall Street?” Or, what about diversifying by doing both?

What does it all mean for you, someone deliberating over whether investing in your own business is, well, a good investment? I have a few nuggets to share on the topic. Let’s take a closer look at the pros and cons of investing in your business versus Wall Street:

Investing in Yourself by Using Your 401k to Fund a Business

  • You’re the one in control
  • It’s an active investment, not a passive one
  • You know exactly where your money is going
  • You reinvest your money into your business and retirement plan however you wish

Vs.

 

Investing in Wall Street 

  • You have zero control – you’re at the whim of the market
  • It’s unpredictable – really, the only thing that’s “predictable” is that it will go up and down
  • Stocks can experience significant price swings
  • For investors seeking a stable investment path, stocks can bring an unbearable degree of risk

Diversification is another good way of investing in yourself. In other words, it doesn’t have to be an “all or nothing approach.” You can be all in one business or multiple businesses. You can also share your retirement dollars in your business and Wall Street. This way, you can have your foot on both sides; it’s not necessarily one or the other because you can benefit from both if you so choose.

Has the Recession Bumped You Out of Your Comfort Zone?

The global recession has pushed a lot of people out of their comfort zones, and that’s especially true for the millions of workers who’ve lost their jobs because of the pandemic. As people experience fear, they start looking for other opportunities, with one of them being funding a business with their retirement dollars.

With the pandemic and the resulting economic uncertainty, 2020 may be your year to bring everything into focus and make a change. Should you invest in your own business or Wall Street, or both? To explore your options, I invite you to give me a call directly at CatchFire Funding. I’d be happy to help by answering your questions.

Related: Is a Self-Directed 401k Smarter Than Wall Street?

Entrepreneurs: Do Not Skimp On These 5 Things

Every successful business owner has made mistakes as they climbed the ladder of success – including me. Since the early days, I learned from my rookie mistakes. I learned where to skimp and where to splurge, and I’ve watched from afar as new business owners made the same mistakes over and over again.

Mistakes are unavoidable. It doesn’t hurt to use the lessons learned by others so you can save some time, and perhaps a lot of money. Here are 5 things that entrepreneurs don’t want to skimp on.

  1. Seeking Professional Advice

When you first start out, it’s common to cut corners to save money. One thing you don’t want to be cheap about is paying for professional advice.

Just because a lawyer practices everything from criminal defense, to business law and everything in between, it doesn’t mean that they’re experts in your field. It pays to reach out to folks with industry expertise, and, like anyone in a specialized field, you should expect them to earn a good living. If paying someone $400 an hour, helps you avoid a $50,000 mistake, or saves you 20 hours of work, it’s worth the investment.

  1. Researching/Keeping Up With the Competition

Your market is continuously evolving; your competitors are trying to distinguish themselves from you. What differentiates them from you? What features or benefits do they have that you don’t?

You want to keep up with your competitors so they don’t leapfrog you. Look for an opportunity that they’ve overlooked. Look for ways to uniquely position your products or services and provide something of value to your clients.

My strategy in many situations is to see what the competitors are doing and do 180 degrees opposite of that. I want to push the envelope in a different direction. For example, if they have leverage from brand awareness and market penetration perspective, find ways to redefine the market, tilt it to your advantage.

  1. Taking Time to Set the Right Goals

Clichés aside, understanding the importance of setting goals for yourself is critical if you want to accomplish great things. Whether your goals are firmly planted in your mind, on a vision board or written on a notepad, what matters is that you’re putting them out there.

When you have big dreams, it’s easy to feel discouraged when you’re facing Mount Everest or K2. By setting goals, you can break the seemingly insurmountable aspirations into smaller, achievable stepping stones.

Big goals aren’t accomplished overnight. By hitting smaller milestones, you’re fueling your ambition and proving to yourself that you can get things done.

Do you want to accomplish something big that others only dream about, and few actually accomplish? Unless you set goals for yourself and work every day toward achieving them, you’d have no reason to believe that you’d accomplish them.

  1. Marketing – Don’t Be Cheap

Marketing is your engine. If you starve it for fuel, your business won’t go anywhere. You always have to tune and feed your marketing engine. Make sure that you put more emphasis on repeatable, scalable marketing vs. non-repeatable marketing.

By repeatable, scalable marketing, think social media marketing, or ongoing content creation on your website. Non-repeatable, or unsustainable marketing would be elaborate, expansive one-off mailers that don’t generate the return that they used to.

Marketing is like a faucet: You can turn it higher or lower. During the busy season you turn it up, but during the slow season, you turn it down.

  1. Budgeting Correctly

In the beginning, you don’t want to undercapitalize your business. If you don’t take enough money out, you’re handcuffing yourself – and you can fail.  You don’t want to cut your hand off. You’re not doing yourself any favors by skimping on your funds, whether you’re starting up, buying a business or a franchise.

Since starting my business, I’ve developed a mental cash flow and budget that evolve all the time. For instance, if I hire somebody or change marketing, that dynamic changes a bit. I pay attention to my business. I’ll even put off making major decisions until we approach the busy phase in our seasonal cycle.

You have to know at least mentally where your business is at with accounting. It’s an evolving talent, an evolving skill that you obtain after you get to know your business.

Are you seeking more business advice?

Are you interested in getting advice about funding or buying a business or franchise? If so, let’s connect. I’d be glad to help you gather the necessary information so you can decide on a plan of action.

Want to Use Retirement Money for Real Estate?

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Are you considering using your retirement money to invest in real estate? If so, you’re on to something. Investopedia describes real estate investing as “the purchase of a future income stream from property” that can offer several advantages over other types of investments.

Such advantages include stability, the potential for higher returns, and of course, diversification. One more advantage: Real estate is considered a “hedge against inflation.” Meaning, when you invest in real estate, it’s expected to maintain or increase in value over time. Since home values and rents typically increase during inflation, real estate investments are an excellent weapon to have in your arsenal or “investment portfolio.”

Using Your Retirement Money to Invest in Real Estate

We first started writing about the ability to use retirement money for real estate a few years back, but it is an increasingly popular topic that comes up often in my conversations with clients. And it’s not just with prospective clients (new entrepreneurs), it’s also with existing clients (seasoned entrepreneurs) who are looking to roll over additional retirement monies to give a real estate-related business a go.

As I always get a lot of questions about the process of using retirement money for real estate and about the meaning of the term “real estate-related business,” I decided to recount my answers to some of these common questions. You can also download our free guide: How to Use Retirement Money to Invest in Real Estate. But before I get to the nuts and bolts of it, let’s take a closer look at why it’s a good idea to invest in real estate.

Real Estate Investing & the Savvy Entrepreneur

In an Entrepreneur Magazine article, Brandon Turner, an active real estate investor wrote about how he had several conversations recently with entrepreneurs who had concluded they needed to start diversifying their business profits into more than a savings account.

“Being a real estate investor isn’t always glamorous but it is one of the best ways to build wealth over the long-haul, especially for the entrepreneurial-minded,” Turner wrote. And, I have to agree with Turner, who listed the following benefits to real estate investing:

  1. Appreciation
  2. A hedge against inflation as described above
  3. Cash flow, also known as “passive income”
  4. Tax benefits, including lower tax rates for long-term profits, etc.
  5. Control over your asset instead of it being controlled by Wall Street

“I don’t like my destiny tied to a board room on Wall Street or a nervous CEO in Silicon Valley. This is why I choose to invest most of my income in real estate, knowing that I am the one who is responsible for my success or failure.” ~Brandon Turner

Using a 401K to Invest in Real Estate

Most people don’t have tens, if not hundreds of thousands of dollars, laying around in their master bedroom safe or personal bank accounts. But a lot of people are interested in investing their hard-earned money in real estate, whether they want to buy rental properties or do “fix and flips” and be “weekend warriors.”

In light of the above, it’s understandable why someone who has funds sitting in their 401k, would be curious if there was a way to use it to invest in real estate without paying taxes and penalties. Can it be done? Yes, and it’s called a SELF-DIRECTED 401k, aka “ROBS” or rollovers as business startups.

1. Can I use my 401k to do fix and flips or rehab projects?

Investing in real estate can be very broad – apartment complexes, commercial buildings, land opportunities, etc. CatchFire Funding has two audiences in the real estate context: one is looking to build a portfolio of assets with cash flow associated with them, and the other is looking for a recurring transactional arrangement. I have conversations with both audiences and they end up merging.

As far as to fix and flips and rehabs, people can do them as long as they adopt the mindset of the business owner. In other words, you acquire the assets, service or rehab them, and remarket them as services. In a long-term context, you can resell them.

2. Can I use my 401k for just one fix and flip or rehab project?

Yes, you can use ROBS for just one fix and flip or rehab project. Someone can use our SELF-DIRECTED 401k once, sell it and unwind all the structuring. Essentially, you don’t want to create the retirement plan and put it on the shelf – you have to dissolve it. We have clients use their 401ks for a single real estate transaction; they’ll go through the process and unwind all the structuring, which is no different than if they bought a business and sold it after three months.

3. Is the ROBS process different if it involves real estate?

It’s the exact same process as if somebody were to purchase a franchise or acquire a manufacturing business. Here’s how it works in a nutshell:

  • CatchFire Funding creates a C-Corporation;
  • We create a new 401k plan;
  • Your 401k dollars roll over to your new plan; and
  • Your new 401k plan invests in your corporation stock. At that point, your corporation can either buy a franchise, a business, a distressed rental property, or a single-family residence!

To learn more about using your retirement funds to buy a business, franchise, or in this case, real estate, tax, and penalty-free watch this explainer video.

Benefits of Using ROBS to Invest in Real Estate

There are several advantages of using ROBS to invest in real estate, such as access to pre-tax capital you wouldn’t otherwise have access to; using that money to acquire a fix and flip project; and, participating in the appreciated value from the corporation paying you a salary, so you can turn it into a business and a job.

The concept of using a 401k to invest in real estate is not part of the traditional investment options, but it’s becoming wider and wider in its implementation. To use your 401k to invest in real estate, you’ll have to adopt the same structuring. It’s no different from real estate; it’s the same as if you were buying any other business assets.

If you’re interested in rolling your retirement dollars to invest in real estate, don’t put your hat on as a speculative investor. Instead, feel free to call me to see if a SELF-DIRECTED 401k is right for you.